Think investing is the same as trading? You’re wrong!

I want to take a few minutes to explain the difference between being a trader and being an investor. They are not the same thing! I often hear people say that they’ve never thought of investing because they are turned off by the idea of trading.

The difference between trading and investing is really, really easy to understand. It’s simply based on your time frame for holding shares in a particular company – in other words, how long you keep a stock after you buy it. That’s it.

For example, let’s say I buy 100 shares of stock XYZ at $25.50 at 10:00 a.m. and then sell the shares at a price of $26.50 at 11:00 a.m. I just made a trade. I held the shares for a whopping 60 minutes before selling them. This is trading. This is not investing. And yes, it’s very stressful!

On the other hand, let’s say I buy those same 100 shares of XYZ, and hold onto them over the next 30 years. Regardless of whether the price goes up or down, I hold onto them. That would be an investment. There’s no trading involved; all you are doing is buying shares and holding them over time! No stress whatsoever.